Talib al-Bayati, an official responsible for a nearby area, also said that the siege of the Turkmen Shiite-majority town in northern Iraq had been broken, as did Nihad al-Bayati, who had been fighting to defend the town against the jihadists.

A child cries in a military helicopter after being evacuated by Iraqi forces from Amerli. Photo: Reuters

The mayor of Amerli, Adel al-Bayati, and army officers said troops backed by militias defeated fighters from the Islamic State to the east of the town. Fighting continued to the north of Amerli.

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"Security forces and militia fighters are inside Amerli now after breaking the siege and that will definitely relieve the suffering of residents," Mr Bayati said.

The advance of the Iraqi forces comes after the U.S. military carried out air strikes overnight on IS militant positions near the town and airdropped humanitarian supplies to the trapped residents there. More aid was dropped from British, French and Australian planes.

PKK Kurdistan Workers Party soldiers near Makhmour, two hours north of Amerli. Photo: AFP

"I can see the tanks of the Iraqi army patrolling Amerli's street now," Amir Ismael, an Amerli resident, said by phone. "I'm very happy we got rid of the Islamic State terrorists who were threatening to slaughter us."

Armed residents had managed to fend off attacks by IS fighters, who encircled the town, who regard its majority Shiite Turkmen population as apostates.

Iraqi security forces, Shiite militiamen and Kurdish Peshmerga fighters all took part in the operation, the biggest military success for the Iraqi government since a lightning jihadist-led offensive overran large parts of the country in June, sweeping security forces aside.

Iraqi Shiite Turkmens, mostly women and children, evacuate from the town of Amerli on board an Iraqi Army helicopter. Photo: AP

Iraqi forces later managed to stem the militant onslaught, but had since struggled to regain ground.

Residents of Amerli faced major shortages of food and water, and were in danger both because of their Shiite faith, which jihadists consider heresy, and their resistance to the militants, which has drawn harsh retribution elsewhere.

US air strikes hit Islamic State fighters near the besieged town eariler at the weekend and dropped humanitarian aid to the civilians trapped there, the Pentagon said.

Women and children sit in a military helicopter after being evacuated by Iraqi forces from Amerli, north of Baghdad. Photo: Reuters

President Barack Obama authorised the new military action, broadening US operations in Iraq amid an international outcry over the threat to Amerli's mostly ethnic Turkmen population.

Aid was delivered by US aircraft as well as planes from Britain, France and Australia, signalling headway in Mr Obama's efforts to draw allies into the fight against Islamic State.

Armed residents of Amerli have managed to fend off attacks by the Islamic State fighters,

"At the request of the government of Iraq, the United States military today airdropped humanitarian aid to the town of Amerli, home to thousands of Shia Turkmen who have been cut off from receiving food, water, and medical supplies for two months by ISIL [Islamic State]," said Rear Admiral John Kirby, the Pentagon press secretary.

"In conjunction with this airdrop, US aircraft conducted co-ordinated air strikes against nearby ISIL terrorists in order to support this humanitarian assistance operation." A key objective had been to prevent a militant attack on civilians in the town.

He said the operations would be "limited in their scope and duration" as required to protect Amerli's population.

When Mr Obama ordered the first air strikes and air drops in Iraq earlier this month, he justified the military operation in part to prevent a humanitarian catastrophe for thousands of ethnic Yazidis trapped by Islamic State militants on Mount Sinjar in northern Iraq.

In mid-August, he declared that the militant siege there had been broken.

A major in the Iraqi army, who was advancing north towards Amerli from Udhaim, said progress had been slow because the militants had mined the roads. He said

he had counted the corpses of more than 40 militants killed in Iraqi air strikes on the road between Udhaim and the village of Injana.

Also on Saturday, the Pentagon said US warplanes and drones had carried out five air strikes on Islamic State fighters near Iraq's largest dam, the latest in a series of attacks in support of Iraqi and Kurdish forces.

The strikes destroyed an Islamic State armed vehicle, a fighting position and weapons, and damaged a building near Mosul Dam, the Pentagon said. Backed by US air power, Kurdish forces recaptured the strategic facility nearly two weeks ago.

Islamic State militants overran most of Sunni Arab areas of Iraq after seizing the northern city of Mosul on June 10, and have proclaimed a caliphate straddling the border with Syria, where they also control vast swaths of territory.

The lightning offensive brought the militants within range of the capital of Iraq's autonomous Kurdistan region earlier this month, prompting air strikes by the US.

The Kurds have since been slowly regaining ground from the militants and on Saturday advanced on the northern town of Zumar.